Republican Says Documents, Raines's Statements At Odds
Thursday, March 5, 2009
Franklin D. Raines, the former chief executive of Fannie Mae, used a special program at mortgage lender Countrywide Financial to receive a below-market rate on a home loan, contrary to sworn testimony he made to Congress in December, according to the top Republican on the House Committee on Oversight and Government Reform.
Rep. Darrell Issa (Calif.) released documents yesterday that he said show Raines received discounts and waivers of fees on a June 2003 home loan through the "Friends of Angelo" program, named after Countrywide's then-chief executive, Angelo R. Mozilo.
In response to questioning at a December hearing, Raines said he was not given a home loan through the program that allegedly extended lower rates to prominent executives and politicians nor did he receive preferential treatment on his mortgage.
Once the nation's largest mortgage lender, Countrywide was acquired by Bank of America last year after suffering heavy losses on bad mortgage loans.
Raines's attorney, Kevin M. Downey, said yesterday that none of the information cited by Issa contradicted that earlier testimony.
But Issa said the documents show otherwise. On June 9, 2003, according to the documents, Raines's assistant was in contact with Countrywide about a new mortgage. An executive in Countrywide's "VIP loan unit," Issa said in a letter to Downey, "arranged a one point discount and waiver of 'junk' fees on Mr. Raines's June 2003 refinance."
The letter says that Raines received a 4.125 percent rate on his mortgage, when the prevailing rate for comparable loans was 5.1 percent. Also, Raines didn't pay the variety of fees -- application fees, warehouse fees, processing fees -- borrowers would ordinarily pay.
"The involvement of Countrywide's VIP unit in the refinancing of Mr. Raines's mortgage and the rate reduction and waiver of 'junk' fees that are reflected in the documents produced to the Committee indicate Mr. Raines was aware he was receiving special treatment, including a reduced interest rate and waived fees," Issa wrote in the letter to Downey. Issa added, "Information obtained by the Committee, therefore, calls into question the truthfulness of Mr. Raines' testimony."
Issa asked Downey whether Raines wishes to revise his testimony before the committee investigates further.
Downey, in a letter responding to Issa, wrote: "[N]one of what is set forth in your letter suggests anything new or anything inaccurate about Mr. Raines's testimony before the committee."
Downey wrote that nothing in the documents mentions the "Friends of Angelo" program. "None of the documents provided by you or produced by Mr. Raines to the Committee support the inference that Mr. Raines was receiving, and knew that he was receiving, an inappropriately discounted loan from Countrywide."
The letter added, "You have not provided -- and so we assume your months-long investigation has not uncovered -- any evidence demonstrating that Mr. Raines was treated any differently than any other borrower with his credit profile and loan-to-value ration or that anyone ever communicated such different treatment (if it existed) to Mr. Raines."
Raines, a prominent Democrat, and Fannie Mae have both been targets of GOP criticism for years. Republicans have blamed many of the nation's economic ills on the government-created mortgage giant. In developments unrelated to the Countrywide controversy, Fannie Mae and its counterpart, Freddie Mac, were taken over by the government in September.
It was at a House Oversight and Government Reform Committee hearing into Fannie Mae and Freddie Mac's fall where Raines was questioned about whether he tapped the special Countrywide program, which was disclosed in news reports in the middle of last year.
At the hearing, Rep. Dan Burton (R-Ind.) asked Raines whether he received a home loan through the "Friends of Angelo" program and whether he received any preferential treatment.
"No, I did not, in terms of the terms of my mortgage," Raines responded.